with a well-deserved vacation. let's get you caught up on the headlines. china easing may now come in days, not weeks. weaker than expected chinese data today suggesting the world's second largest economy is slowing faster than anticipated. china's july exports are rising just 1%, imports also falling short of expectations. plus, the u.s. agriculture department will release its latest crop report this morning. analysts say it is likely to show the corn harvest will drop 11% from last year with yields 23% below normal. the outlook is nearly as bleak for soybeans, but most of the wheat crop was planted early enough to escape damage from this year's drought. and finally, this is big news on wall street. the justice department is not going to be pursuing criminal charges against goldman sachs or its employees related to the financial crisis. the doj has been probing accusations that the firm bet against the same subprime mortgage securities that it was selling to customers. the government now saying it couldn't meet the criminal

burden of proof. and mr. kernan, that's going to be -- i don't know if it's a controversial decision, but i imagine people are going to still be debating that one for a long time, fairly or not. >> i'm learning what post-modernism is now, andrew, in the "wall street journal." and it's interesting, because it's basically the idea, it's a literary theory that you really reject anything that's objectively true and you realize that everything is a matter of interpretation in relative truth, and they use this as call the president the first post-modern president, because basically, the thrust of the "journal" piece is the challenge is that finding anything that his campaign says that is true. that's the challenge, to find anything that's true, and it's talking about that commercial basically where a man accuses mitt romney of killing his wife, essentially. and the funny part here is that at least the obama tiers didn't suggest that romney was the direct biological cause of the

cancer. they may be waiting to bring that charge until october, just before the election. but i was thinking of this in terms of goldman sachs, because i'm not going to spend any time defending goldman sachs today, but the modern, the post-modern interpretation is that goldman sachs was guilty. >> right. >> and whether it's true or not, objectively, it's not true, because if the justice department -- >> absolutely. >> if the justice department could have done it, they would have. but "the huffington post," all the liberal blog sites will assume -- i kidded you when i walked in this morning. i said, andrew, i have decided not to bring charges against you -- >> yes. >> -- for child molestation or for beastality or whatever. i've decided not to bring charges. >> thank you for that. >> you've never done anything to imply that you had anything to do with those things, but i've decided that by not bringing charges, i'm basically saying that you are, right? >> well, but they were investigating, so it's better for them to say that the investigation's over than for them to say nothing, right?

>> but you will hear the left and the progressives carping, here's another group of criminals who got away with it. >> that got off the hook, right. >> that got off the hook, that were absolutely guilty, and they didn't. and you know what? i'm going to live -- maybe viewers would say this already -- i already live in a post-modern world, i think, and boy, there is no objective truth. this, i have something that is true here. are you ready? >> before you do that -- >> yeah, go ahead. >> one of the things that frustrates me -- i'm glad we're doing this conversation at the top of this hour. >> and you're not sitting across from me. we couldn't even get past standing up and doing the headlines. we have a lot to get off our chest. >> just real quick, if you look at the front page of the "the new york times," no mention of the goldman sachs story. if you look at the front page of the "financial times," no mention of the goldman sachs story. >> weird. >> the "wall street journal" has it at the top of their ten-point, but it's not on the front page. and if you go back and think about -- >> why? >> -- all those days and weeks where it was at the top. >> why? >> now it's over and everybody buries the lead, so -- >> why is that?

yeah. >> it's frustrating. >> maybe it's just the sheer disappointment at "the new york times." >> by the way, i wasn't making the point just about "the times," but media broadly. >> then we talked about the front page of the "daily news." >> yes. >> son of sam. >> go there. >> deplores gun violence. right below that, samuel deplores big banks 37 that's what i saw. that's what i read when i saw those. you didn't connect the two. >> i wasn't as quick as you, but i will agree with the assessment. >> first thing i thought of, son of sam -- you just can't believe what's happening with the gun violence. son of sam. what has society come to? he's in prison just shaking his head. anyway, andrew, come over here. come closer. >> i'm going to walk over. in other corporate headlines, chesapeake energy says it is the subject of a u.s. government investigation over possible criminal antitrust violations. the issues relate to the purchase and lease of oil and gas properties in michigan. the company's been subpoenaed to

produce doments for a grand jury. back in june, reuters reported that chesapeake plotted with its top competitor to suppress land prices in northern michigan. and manchester united is expected to begin trading on the nyse today. the british soccer club's ipo priced at $14, below the $16 to $20 range bankers were seeking. the company will trade under the ticker manu, and it's impossible to mention soccer, obviously, without mentioning that the u.s. women yesterday -- >> unbelievable. >> fantastic. and two goals by the same, beautiful goals, just running through. i mean, it was so -- but the defense and the close calls. it was nail-biting. even with 10 seconds left, the japanese never gave up. they kept coming and kept coming and it was sweet revenge from the world cup last year and another gold, third straight for the u.s. women. >> if you were a soccer player, would you be the goalie? i could see you -- >> no. >> or you'd be on the front

line? >> no, i think i'm a better -- >> you'd be your coach. >> wouldn't you want to use your hands? >> that's why i thought you would be the goalie. >> because god gave them to you. it not be able, to be constantly -- it's unnatural. but a great run for the u.s. women. >> did you see bolt, by the way? i know it's not a u.s. -- >> i did see that. >> it is remarkable. >> it is, and to run that quickly in the 100 or 200, your whole body -- >> unbelievable. >> -- has to be one big muscle, basically. and they are. you look at those guys, it's so cool. >> i couldn't do that. the owner of carl's jr., which you probably have never had, i don't think, because you never lived in l.a., right? >> i never lived in l.a., but i have been to a carl's jr. in l.a. >> they have a best what they call a western bacon cheeseburger and they put like an onion ring on it and the special sauce. >> i've been to carl's jr., i've been to in-n-out burger. people like the freets. i call them fries. very european.

>> carl's jr. is postponing its ipo, citing market conditions, which is i guess a commentary not on fast food and really not so much on the consumer, but on wall street, i would think. wouldn't you think that's probably in the ipo? i mean, the t.a.r.p. defender didn't come, either, because of market conditions. a few things i love. >> but manchester united coming, and under the price. >> we'll see. >> we'll see how that ultimately does. >> right. that's the most successful of the soccer teams, i think, right? >> it is the biggest of all. i mean, this is like the yankees in terms of global -- >> or the reds. or the reds. >> i would prefer if you would -- you want to stick with the reds? >> do you have to -- >> but the yankees in terms of valuation, how about that? new york market, its market. >> in a post-modern world, value doesn't have to be just with money, andrew. >> you're so egalitarian. i love that. let's talk about other news this morning. u.s. regulators telling five of the country's biggest banks to develop plans for staving off

collapse if they faced serious problems. the 2-year-old program has largely been secret up until now. it's in addition to the living wills the banks crafted to help regulators dismantle them if they actually do fail. reuters is saying that the banks were first told to come up with the "recovery plans" back in may of 2010. and american and british authorities are at odds in the libor probe. they reportedly disagree about how and when to interview key traders in london. london is moving faster and it appears the doj is said to be worried that those interviews could compromise its own probes. this could complicate efforts to build a complete picture of the scope of the alleged bid-rigging. finally, the consumer finance agency is outlining mortgage protections, proposing new rules aimed at protecting homeowners from unexpected costs and shoddy service by companies that collect monthly mortgage payments. today the cfpb -- we've got to get a new acronym for them -- they're going to say that

servicing companies should be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and help them avoid foreclosure, all the kinds of things you would have hoped they would have been doing beforehand. >> yes. let's check on the markets this morning globally. first, we'll start here. we are looking at an indication for -- oh, that's not as bad. i saw the 41 go by and thought, oh, that's not good, but with a fair value down 17, we're just indicated down about 24 points. we did give back, we broke our four-day winning streak, but only gave back ten poins points on the dow yesterday and the s&p is still above 1400, so we'll see what happens. did you get the ida numbers -- oh, that's the fair value. i'm always moving on and i always have to wait and go back to this thing that gives us no information. anyway, down 0.8%. okay, here is the oil board. the iea said global demand is going to be down, and for some reason, we are at $92. yesterday we talked more about

qe and how qe has not done anything to the market. >> not yet, but it may be coming. >> even the idea of qe-3 i think has helped the stock market. >> and you think it's helping the oil market, right? >> hurting the market, yeah. the ten-year? although the ten-year seems to imply prices -- sorry, the yield is down, price is up. that seems to imply that globally maybe growth is better, although when we start talking about getting up to 2% like it's a rip-roaring economy, that just shows you how low rates have been. dollar versus the euro. for some reason, i watch that for man the yen. i guess if i was planning on visiting japan it might be different, but the euro down. and finally, gold is hovering around the $1,600 level. it's august. what say you, $2,000 this year on gold? i said no at the beginning, i still say no. >> i still say no. i don't think it gets there, but i think about buying some.

>> why don't you buy a gun? >> i'm going to buy both. i am. i'm thinking about it. >> i talked to the imminent brian steele again and there's a book called "the road," where, why should we assume that society continues along in an orderly fashion? why should we assume that if there's food shortages or if there's -- >> i was being sarcastic about the gun because you know me and i don't want to own guns. >> you're going to be right in the middle of all -- you'd better get at least a taser, bro, get something, because you'll be right in the middle of that melting pot -- >> i have children that bite. >> you're going to sick your kids on them? that's a good idea. all right. i hadn't thought of that. i have a german shepherd, but i'm looking at if you need gold, you may need gold to buy your way out of those -- >> maybe you can get one of the wolf dogs that that fellow was using down at the prison. >> my daughter wants one of those. >> yeah. >> half wolf, half german shepherd. >> i don't know if most viewers know what we're talking about. >> because the cutbacks, they now have instead of prison

guards, they have half wolf, half malamut dogs patrolling and not one prison has escaped. >> and they've talked about this. and we have a big wolf. >> our german shepherd, a large-breed german shepherd. we're going to go across the pond, last time i think i can say it, to the land of the olympics. time for the "global markets report" where kelly evans is standing by in london. and on monday, we won't be able to do that introduction. how are you? >> hi, andrew, i'm well. i think london wouldn't mind if you kept using the introduction. they're certainly planning to use it to generate more of a long-term boost to tourism here in britain. in any case, speaking of britain, barclays is one of the banks generally leading the european stoxx 600 higher this morning. shares up about 3.5% after news david walker will be the company's new chairman. but aside from that, it is more of a red than a green picture this morning, decliners out-pacing advancers by about a 4-1 ratio, and overall, we're

down about 0.4% on the index. now, this comes as china reported trade figures weaker than expected, particularly on the export side. exports growing just 1% year on year, and it's remarkable. i mean, that sounds like the kind of growth you'd expect out of europe at this point, not out of china. but in any case, that put pressure on asian markets, the hang seng down 0.65% and the shanghai down 0.25%. the ftse is down 0.2%, the xetra dax is down 0.5%. also happening in the ftse, despite the negative picture overall, we've seen barclays higher, we see prudential shares lower by 1%. now, the company did come out, reported 13% increase in first-half profit and strength, interestingly enough, in its asian division. and we did have ceo tidjane thiam here on b"worldwide exchange" earlier this morning and here's what he said about the asian demand picture. >> the main constraint to our growth is our ability to put it

out there, because if you wish, demand is infinite, so we grow as fast as we can grow our distribution machine. >> demand is infinite. so, interesting words there. he says their biggest problem is getting enough agents out there to sell product across asia. nevertheless, shares of prudential lower, and again, market shares generally trading weaker on asian sentiment this morning. you can see the bond space, a little bit of the same reflected. italy, spain, their ten-years are selling off a bit, yields are up to 5.9% and 6.9% respectively. quick look over here, better picture in france and the bunds benefiting from this pivot. quick look at commodities. the iea came out with its global demand outlook, revising down figures for 2012 and 2013. it actually sees 2013 demand lower than 2012. that's taken some pressure out of oil prices, down about 1.2% for nymex and brent, and i'll pass it back to you guys with joe's favorite, the euro/dollar, down about 0.3% today, again, after a sort of stronger risk picture over the last couple of

weeks. today the market appears to be taking a pause. guys? >> and in our ten-year over here, too, kelly. thanks. coming up, we'll talk ipos. manchester united's price is below expectations. and the parent of carl's jr. postpones its offering. i also have fried zucchini at carl's? >> yeah. i look fried zucchini. >> is that healthy? >> anything fried, no. >> we'll tell you what that says about the broader markets, next. first, this morning's sports buzz beyond the olympics. we are watching some golf. it's cut day at the pga championship. carl peterson, a one-shot advantage over gary woodland, alex noorg, gonzalo fernandez and rory mcilroy. they're 4 under. john daly is in a group just two back. and tiger, i saw, was 3 under. phil last i saw was even, but it's going to be great. playing down at kiowa, the ocean course. we'll be back in a minute. ♪ okay, here's the plan.

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welcome back to "squawk." this morning, we'll be watching retailer jcpenney today, just reporting a second-quarter loss of 37 cents a share, wider that be the 25-cent loss analysts were anticipating. it also says it no longer expects to achieve its previously issued 2012 earnings guidance. ceo ron johnson, who we've talked a lot about around this table, says while business is softer than anticipated, the company's transformation is "on track." we also had some pershing square, bill ackman, on the set who put ron johnson in his place, took him from apple, trying to transform this company, and arguably, this is going to be a slow and bumpy road, and hopefully, they get there, but analysts and investors are not happy about it. at least it seems that way at the moment. >> do you hope that they get there or you don't?

>> i absolutely agree. >> you do? you're rooting for jcpenney? >> i'm rooting for everybody. >> really? >> look, i want ron johnson to be successful, i want the company to be successful -- >> are you rooting for -- >> i want them to create jobs, all of that. >> are you rooting for hewlett-packard? >> absolutely. i want them to win. >> how about kodak? >> i pray for rochester every day. >> are you still sad about the buggy whip company? how about the mall record store shops? are you rooting for -- i mean, things do need to -- >> things do need to change. >> you're okay with that, right? >> yes, but jcpenney is not being out-moded by technology. >> it's kind of been out-moded for a long time by a lot of stuff. >> the question is whether they can come back. i love a great comeback story. >> are you rooting for sears and kmart? >> you know, if eddie lampert can make it work, i would be -- >> are you rooting that you can still -- have you ever been to a sears? >> i have been to a sears, absolutely. >> and you need a sears to be around for you to be okay? >> i don't know about that.

>> see, i don't think you were genuine in saying you're rooting for jcpenney. i don't think you truly care. >> that's not true. i want them to succeed. >> you do? >> i do. i'd like them to succeed. >> how about this, if they deserve to succeed, i hope they do. if they earn it, then fine, but you just don't prop them up just because you've heard of jcpenney. >> it's because i think what they're trying to do is interesting. >> are you with me on this? >> i think you need a full-time referee. >> manchester? >> becky's not here today, but usually she has a whistle. >> manchester united is tet to start trading. now, do you root for -- there are other soccer teams. do you just vote for manchester united? >> i'm a fair-weather fan. >> it's set to start trading. england's on beloved team is one of the new brands to hit the ipo floor. david is president of ipofinancial.com. great to see you. >> great to see you. >> why would fender or carl's

jr. -- it's just the overall malaise in the stock market or what has caused it to be so tough? >> i think it's a little deeper than that, joe. the period that followed after the facebook facebook debacle really just set everybody on notice that if you're going to come into the ipo market, you have to show us something. and you're also going to get a haircut, whether you want one or not, in your valuation. >> it's weird, because comparing anything to facebook is not really an apples-to-apples comparison. i mean, you try to raise -- even though it was only a percentage of facebook -- but the valuation was $100 billion on a company with an ipo. maybe we did talk about it, but maybe it should have been a little bit more obvious. that's going to be tough to do. >> well, you know, really what it boils down to, your comparison issue is -- >> fender guitars, david. i mean, that seems like a business that it's been around a long time, it's attractive, they're great guitars. it seems like a totally different thing. and for market conditions to not good-bye for fender must point to something even worse.

>> when you hear the word market condition, this is the company basically saying we can't get our deal done because nobody's interested in it because of something that's wrong. in the case of fender, they weren't getting into the penetration. >> you just think it poisoned the well? >> absolutely, there's no question about it, and every deal, including the carl's that you see today, and even the manchester is a victim of it. >> pricing at a lower number. >> right. now, this is an interesting situation. we've got a balancing act that we can go through here. i'm going to give you some hard predictions here. we've got a couple hours until we go here. this could be a deal that is going to work and work only because of the underwriter, jefferies, that they know what they're doing and they'll price it to where it does work. a lot of the deals that have been successes this year are working because they did get that haircut. the other side of the coin is we may end up having son of facebook here. you get that opening pop because people are talking about all positives, but then when everybody looks over their shoulder, say well, i bought it. who's going to buy it from me thinking it's cheap at these

higher levels? so, i think it's going to be the latter, we're going to get the pop and then after that, the stock's going to fade and could possibly break issue price today. >> we did have that person yesterday saying that the biggest -- we asked the one thing that traders need -- successful traders -- one thing they share is that none of them think about -- you saw that? >> yes. >> none of them think about the actual valuation and cheap or expensive. everybody thinks about what i'll be able to sell it for in the future. and that's the most important. >> joe, you mentioned the overall malaise in the marketplace. we've had 89 ipos priced since the beginning of the year. >> that is a low number. >> it is a low number, exactly. and what we're really ignoring in the marketplaces when you talk about it is that secondary offerings have out-stripped the ipo priceings by almost a 5-1 factor. so, the money's there, the deals are working, the underwriters are not paying attention to the issuer -- >> why is that? >> demand for capital. >> but i'm saying why are the secondaries working and the ipos not? >> because you have the discounting capability.

you have stocks that everybody's comfortable with, they announce an overnight transaction. >> they've been trading for a while. >> a long time, sure. >> how do you feel about ipos coming out of private equity these days? >> i think -- i hope i don't get on your bad side with this, joe. i think it is the most financially screwed up situation in the marketplace that we'll all sit back with our arms folded and said private equity is wonderful. it is an irresponsible financial enrichment campaign for the individuals, irresponsible. >> i did not set him up for that. >> i know you did. >> i honestly was curious what he thought. >> he's got a firm that follows ipos. i've got opinions, too. >> okay, but they do actually bring a lot of the deals into the marketplace. >> they do, but they can't bring them in if -- they live by the same rules that you were just talking about. if they go in, they buy a company, they try to improve it, they can't bring an elephant ipo, then they can't, eventually they've got to bring it back

out. >> let me give you an extreme example here of why this doesn't work. warner music group -- >> well, again and again and again it works. you can see with all the return the plans have gotten in the past -- >> at what cost? >> you knows? some work, some don't. >> okay, an example. warner music group when they had their last leverage buyout, became public again, they pulled so much money out of the company, left it in debt so much that the insiders owned their equity positions without selling a single share at 67-cent profit. >> right. >> because of all that they took out. just because you can doesn't mean you should. that's my only thing. >> it's a huge continuum move, things work, companies improve. >> but if they didn't pull all that extra debt, go into the marketplace and pull the debt out -- >> if you pull the debt out in 2007, you run into 2008. change from here -- >> i'm just saying -- >> and that's just one situate, warner music. >> i'm just saying from the pool of debt, not the company. >> all right. >> david, we'll have to have you back and continue this conversation. appreciate very much. coming up, empty backpacks for back-to-school.

we're going to talk about it. a lot of analysts are worried about the state of the american consumer.

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securing a world of new opportunities. ♪ ♪ good morning. welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin. becky is off today. making headlines, sales of video game hardware, software and accessories falling for the eighth straight month. analysts say the industry is looking towards the release of new equipment to cure the sector's woes. private equity firms tpg capital and others are in the running to buy nike's leather handbag and

shoemaker coal hann. the businesses seem to be worth $500 million and the auction is in the second round with several parties involved. and we're watching shares of retailer jcpenney and hoping and praying things will be okay. the company just reported -- >> we're going to be praying? >> we're just going to be hoping they make it. we're going to be hoping that in the future that they're able to turn the ship around. >> that would be great if they could, and to revolutionize retail, but if they do it right, fine, if they don't get them going -- >> they'll go, that's okay. one or the other. >> either run a factory, learn how to do it. >> you should want people to succeed. >> not everyone can succeed, though. you know who i want to succeed the post office, and it's just not working. did you see the latest? $5.2 billion. >> but some of that, if i'm right, is part of the money they have to give over as part of the pension. so, let's divide it up

realistically. >> fine. multiply it by four, because that's a quarter. >> well, no, a lot of these are advanced payments, but they're still losing a lot of money. >> $5.2 billion. think about that and just realize, senior health care will be managed by the same organization. so, you've got that going for you. let's check on the markets this morning after that -- what do we call that? we call that an aside. >> hyperbole, conflation, straw man. you call it a lot. >> here's the fair value this morning. it's not the sorkin's fair value today, but my lawyers will be calling. dow jones looks like it would open 24 points off. nasdaq off about five points. s&p 500 would be off about four points. let's take a look at the oil boards, if we could. had to buy some gas today. we're at $92.35, not so happy for him. we have john hofmeister later who might want to talk about that. let's look at the dollar board,

if we could, maybe we could. there we go. what do you want to talk about? do you want to talk about europe? 1.22, is that interesting to you? >> not so much. >> what are you -- >> today i'm reading your column here about the guy that wrote the dylan book. >> yeah. it's not my column, it's your column. >> no, the column that really likes you. >> right. >> good. >> let's take a couple quick more looks through our boards here this morning. there you've got gold. joe and i were talking about buying guns and gold, whether we get to $2,000 or not. right now we are at $1,612. let's talk about retail. all day on cnbc, special coverage of "the american consumer" and the back-to-school shopping season. analysts are more cautious than the forecasts from industry groups and cnbc's courtney reagan joins us with more on that. >> good morning, andrew. tomorrow is back-to-school saturday, an event created by "teen vogue" in an effort to excite shoppers around the country for retail's second most

important season. they have a logo and a hashtag. you can see it here. a number of retailers and brands are on board. they'd love to add another annual shopping event to the calendar, but will it work? many industry groups are forecasting an uptick in back-to-school sales, but analysts are not so sure. sales and freebees may not be enough to entice consumers to buy more than the basics on saturday or later in the season. now, citi expects the softest back-to-school season since 2009. not only are fashion trends uncompelling and mall traffic relatively weak, but that typical macro environment and tough sales comparison are headwinds for retailers' financial performance. but the one thing that happens every year, regardless of economic conditions, is that kids do grow out of their old clothes and depleted school supplies need replenishing. so, while parents may hold back on some of the extras, the basics will more than likely be added to shopping carts. so, mkm partners patrick mckeever has target as his top pitch, encouraged by broad-based sales growth in july, holding with the theory that consumers will stick to the basics.

citi has walmart as the top pick for back-to-school. and ubs favors off-priced retailers tjx and ross stores. and forecasts continue share gains for that group. now, on kohl's conference call, the ceo said consumers are shopping later for back-to-school this year and if that's the case, back-to-school saturday may actually end up being too early. joe? >> okay, courtney, thank you. and you're playing -- courtney is helping us play in to this sort of mini theme today. you saw t.j. maxx, ross -- >> she's rooting for them, right? we all want success. >> here's my point. this is what i'm saying. if in europe there's this idea that antitrust officials over there actually are more concerned, sometimes, with making sure everybody stays in business because of the jobs that are there. >> right. >> and eventually, that will backfire, right? >> that's true. >> because not everyone -- >> not everybody can succeed. >> i want all the employees to keep their jobs. i want shareholders to be enriched at jcpenney, but i

sdhand you need to earn all of that by running a good business -- >> and they may not succeed. >> that's what i mean. we don't hope for everyone. over in europe, they don't want anyone to fail over there because there could be job losses, but the creative destruction, as ugly and, you know, sometimes near term, it can affect people's lives very negatively, but eventually, i mean, you look at what, instead of record stores, we have the ipod, right? >> did courtney leave us? i was going to say, the segment was called "empty backpacks," and i was thinking to myself, in the future, now that people have books, because people have ipads, are you -- >> are you rooting for the backpack? >> i was going to say, what happens to those manufacturers? you were talking about the buggy whip manufacturer. >> don't they carry the laptop in the backpack? >> i don't think she has a microphone. >> we're talking about you, courtney. >> we're talking about you. [ inaudible ] >> i know you don't. it's okay. if you have comments or questions about anything you see here on "squawk box" -- andrew, move your lips because the

director's got -- i don't know. >> hello. >> might be in there. god knows what he's doing. comments, questions about anything -- >> keep going. >> -- you see here on "squawk," e-mail squawk@cnbc.com. coming up, information is flying fast and furious from twitter to facebook. there's no shortage of sources for stories about stocks and stats these days. we'll ask how social media plays a role in investing right now and help make it work for you, next.

welcome back. u.s. equity futures at this hour indicated slightly lower when the session opens. we broke our four-day winning streak yesterday, closing down about ten points.

we're indicated down about 31 points today. making headlines, the iea says that global oil dmanth demand growth will fall next year, and that is, looks like maybe influencing these markets a little. already very weak levels. why is it at $92? among the reasons, a slowdown in economic activity, but the iea seems to be recognizing the slowdown in economic activity right as we're starting to see maybe that starting, you know -- they're not leading indicators. >> you need some old indicators. >> lagging. >> lagging indicator, okay. >> i think now we're starting to see maybe things getting better, right? >> feels that way. we can only hope. i'm as you know, a little anxious post-labor day. that's my anxiety, because i feel like all the europeans are going to come back, that whole conversation will re-emerge. >> they do go on vacation. you know, we had a list of restaurants that our friend daniel, when you went to paris, gave us a list of these.

so, more than half that we called -- and it wasn't even august yet -- they close for august. >> oh, yeah, they're gone. >> and some of them are closed on july 28th. already closed. they close the whole place! where do they go? where do they go eat? they're eating somewhere in croatia or portugal -- >> ant rene. >> or, or santorini, somewhere. >> coming up, we're going to talk social media and making social media your investing partner. people are now turning to twitter, blogs and facebook in to their sources of information, and there's a lot to it. and then, we're going to talk "american made" how one company specializing in cleaning homes is benefiting from an economic slowdown. those stories and a lot more when we return. [ male announcer ] every day, the world gets more complex. and this is what inspires us to create new technology. ♪ technology that connects us to everything the world has to offer

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welcome back. today's "american made" company is cleaning up, literally. craig donaldson is the ceo of molly maid. i'm looking at the great story, the way it was started, i think a classic entrepreneurial start. you've got 450 franchises. basically, the people learn how to recruit people that go and clean people's houses, residential cleaning. that's basically it, right? >> yes. yes, that's right. >> and it was started in 1984. what happened in 1996? the franchise -- or oh, the foundation was started in '96. that was the point i was going to make. you start this company, you build it, and then you start a philanthropic organization which works with domestic violence. this is exactly the way that things are supposed to work. >> yes, that's right, joe. molly maid was started in 1984, and as you mentioned, has 450 franchisees throughout the

country that delight customers by coming in to their homes and cleaning their homes and giving them that pride of ownership, helping them to feel great about their homes. and because of that orientation, most of our home service professionals are women. we've took a special interest in domestic violence and have contributed over $1 million to 100 different domestic abuse shelters throughout the country. >> and how many employees, with all -- if you count all the 450 franchises -- and you're not just in the united states, either, but how many employees in the united states? >> in the united states, it's roughly 6,000, maybe pushing to 7,000. >> the idea that boom-and-bust times would affect people's ability to not clean their own houses. i mean, in 2008, was business bad? did people cut back? >> well, you know, we actually had growth in '08, but we did

decline in 2009. since then, we've had double-digit growth throughout the system with 90% of our franchise locations growing. so, we're not up to the high teens we were at before the recession, but we've certainly had a solid rebound. >> would you call yourself a small business, or would this be medium? i guess this is like a large small business is what we'd be talking about. what i'm getting at is i'm wondering whether you're looking around and saying there are things and regulations and obama care, there are things that are making it difficult for us to operate right now. is that a fair statement or not? >> well, let me first mention, as a franchisor, i would still call us a relatively small business, but certainly, our franchisees, the independently owned and operated franchises throughout the country, they're definitely small business owners.

and the growth we've had comes from their entrepreneurship, from their drive, from their desire to grow. and we have seen recently some incentives that are starting to get incentives away from that. so, for example, with the new health care law, i've heard more than one franchisee worried about hitting the 50 employee level because things become so onerous and difficult. so, some of them -- i think i heard it three times in the past two weeks -- they said, hey, i am at 40 employees and i'm not going to push past that 50 mark. what a shame, at a time when the country needs jobs. >> right, so that's hurting. i wonder, do they operate a subchapteresque? are they affected by -- are these people that supposedly make over $250,000, but there's no real small businesses that make that much, would they be affected by not extending those tax cuts? >> yeah, i think a large percentage of them would be.

i think about 30% of our franchisees are doing revenue north of $1 million. and so, because of that, if you take, you know, some reasonable profit percentage, it would affect of them, i'm sure of it. >> well, we are out of time. we like doing this american made stuff. >> i love great american stories. >> 450 franchises, 7,000 employees. >> talk about small businesses, this is it. >> and then you give money away once you're successful enough to do it. craig, thank you. appreciate your time. >> thank you very much. >> you're welcome. >> we saw with that jean paul dejoria. >> and to be that pro profit, pro business, and the beard. >> i liked him because he was sort of in the middle, not in the middle -- >> he wants, he says he could still do it now and you wanted him, to you that proves that entrepreneurs can still do well in this. >> i thought he made business

decisions and moral decisions. >> that was a whole new idea a businessman could make a moral decision. >> sometimes, we've had conversations about morality. >> a lot of times, with my argument is, when we have someone come in and say like richard branson you can't do capitalism, you now have to do all of this other stuff to make yourself productive or to make yourself a positive for society, i say jobs, i say, you know, when you do something well, if you get successful enough to give back and to do philanthropy, fine, but just providing the jobs and doing what businesses do, in and of itself is a positive thing. >> i agree with you 100%. we have another guest but in the concept of moving moral compass, we talked about walmart and other things. our next guest has an innovative investment strategy that could lead the way to bigger profits based on alpha strategy and social media tools. joining us from jerusalem is zach miller, founder of

tradestreaming.com, a website that provides tools and tips to help investors make smarter decisions and author of "tradestream your wage of profits: building a killer portfolio in the age of social media." we spend a lot of time on facebook, twitter, websites, everybody's got a view, everybody's got an opinion, news and rumors and speculation. how much attention should we actually pay to any of this? >> well, that's a great question, and i appreciate you guys asking me on to the show today. if you noticed what twitter did this past week, introduced a tool called cash tags, everybody talking about stocks can tag the fact they're talking about stocks. twitter itself recognizes the huge potential in the communications medium that is twitter to talk about investments. >> but how much should i worry about bad rumors, bad information? i can't tell you how often i see

a rumor during the day which changes my job as a reporter because it leads me to go chase down stuff that by the way half the time isn't true. >> so the thing about social media is that everybody's dirty underwear is laid open to the world, so one could make an assumption that the lack of transparency in current financial services is a huge problem, when i'm on sold media and i'm looking and seeing what people are talking about, i can drill down and figure out how good is this person as a stock picker? is he trustworthy? has he given me other good picks? that trend towards increased transparency benefits everybody in the financial services ecosystem. >> we here in new york at least, there are some hedge funds and others who have managed to somehow take the twitter stream and facebook and blogs and create algorithms around it, in terms of sentiment readers and

more importantly trying to read the news and trade on it electronically. does that make sense to you? >> so ultimately, that is the holy grail. i think we're a little bit early. if you think about this in terms of stages, the first part of social media and investing that intersection is about connectivity, connecting people to one another. the next step is actually about me being able to replicate other people's trades within my own account. the next stage, and this is the part we're not quite at yet, is me being able to determine who i should be following, whose trades i should be replicates. right now it's human nature and behavioral based and we know individual investors are not particularly good in terms of pulling the trigger. >> should we be worried about frontrunning? with he worry about somebody talking their own book, everybody buying whatever it is and then the person dumping it. isn't that happening in some way

ad nauseam in an unregulated, uncontrolled environment? >> it might be happening just like in any market, but i'm not concerned so much about front-running. i'm more concerned about piggybacking so a lot of what i talk about in my book and the strategies i talk about on my website, tradestreams.com are about replicating other people's strategies. if you look at warren buffett's strategy, buying in 90 days after he made his original purchase you can still find alpha in his strategies and social media is the way those ideas get profit -- go ahead. >> no, i was going to say thank you. we're in a time delay, we're in new york and you're in jerusalem. zach miller, thank you for your time and congratulations on the website. crickets, crickets. >> it's hard enough to interview people and you get a five-second delay. people at home are like stop interrupting sometimes. you don't try.

you ask and you're waiting and hoping he heard you. silence is deadly on tv. >> it's like radio. >> you have to wait for five seconds. >> you have arrived on, people are tweeting, is andrew coloring his hair? it's noticeably dark today. why would someone 35 years old -- >> i'm not coloring my hair. i wish i was -- >> people are absolutely sure that i am and i have never, ever, co-chores look, oh. >> honest, at least from the tv here, both of our, maybe the light something different today. >> never have. >> both of our hairs color. >> you don't need to color a toupee, you buy it and it doesn't change. >> i got a couple grays coming in, by the way. working on the set? i didn't want to have to say that. >> this morning's top stories including why shares of jcpenney are trading lower and how disappointed andrew is, get the real story about the retail and american consumer coming up.

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watching your money at work. first principal's capital management doug descheel is here. and larry bates navigates his latest housing trend. former shell boss john hofmeister on the latest threat to your wallet, plus a new way to monitor trading trends that could boost your portfolio, could be as easy as your next tweet. we'll explain as the second hour of "squawk" starts right now. good morning and welcome to "squawk box" here on cnbc, i'm

andrew ross sorkin along with joe kernen, becky quick is on vacation this week. dow looks like it would open 36 points lower, nasdaq off 7 points and the s&p about 5 points if we opened now. jcpenney shares already getting slammed in premarket trading today. the retailer just reported a wider than expected loss for the second quarter, and it says it won't achieve its previously issued earnings guidance. we'll have more on jcpenney in a moment. plus and this is big, joe and i were talking about it all morning, the justice department won't be pursuing charges related to goldman sachs during the financial housing crisis. the doj concluded there was not enough evidence to charge the firm. >> there needs to be some evidence of law-breaking to pursue charges. doug, i'm not going to charge

you for financial fraud today. just so you know. >> that's good. >> do you feel better? >> no, but can i pay my way out of that problem if i pay you $500 million? you're going to contemplate charging me with fraud and i will pay you $500 million. >> shake 'em down. spitzer used to threaten for things he wasn't allowed to do. >> aren't you happy, because otherwise these can hang over people's heads for a long time. >> watching when it was occurring, carl levin, i don't want to go back to the feelings i had. >> i remember that. >> if you take a huge investment bank and things are going for principle and agency and there may be times when they just sold something to a customer, where they may have a position somewhere else they happen to be going the other way on it, they may not even know that they're short stocked or whatever, and this, they had clients in europe

begging them to make this product to still go long in mortgage-backed securities and you got jeon paulson saying i want to go the other way and goldman gets in the middle of it. >> my favorite moment on "squawk" ever, i hope you can pull the tape in the 8:00 hour, you, carl, doing an impression of carl levin and lloyd blankfein which was the greatest moment on this show, personal opinion, but -- >> we've had a lot of good moments. >> we've had good moments but we're going to have a great moment. >> we have one now because of how much you love jcpenney. you're rooting for them. >> i like to root for them. >> they ran for how long now, andrew? >> several years, if not a decade. >> sooner or later, if you can't, right? >> i hear you, but let's talk about it. jcpenney's ceo ron johnson says the company's transformation remains on track despite a wider

than anticipated second quarter loss which we just heard about this morning. joining us on the "squawk" u.s. in line, dana telsey, ceo of telsey advisory group? >> it is worse than expected, the traffic decline was 10% in the first quarter down, 12% in the second quarter. we'll hear about the launching of the in often store shops, the meeting takes place this morning and we'll hear more details about what the new merchandising efforts, how the rollout will be, and they say the early response has been encouraging. what does that mean? that's what we want to hear as they remake the store. >> do you have any sense this can work? >> i think overall you have to have the word sale in there in order to drive mrs. smith to the store. i haven't seen retailers who haven't put the word "sale" in there or haven't had a percentage off be able to attract the american consumer. i think you've got to go back to that. >> dana, does there come a time

when a brand just loses its cache and can never get it back or can it always be rehabilitated? where is jcpenney now? >> basically it's lost its cache for a long time, you said andrew, it's been ten years or so. i've been in the stores, as we're in the middle of the shopping tour, all are being retrofitted, repainted, the fittings of it. can it come back? we've seen it happen before. >> what's an example of that? >> look at coach and basically coach was a library brand, had bags that looked all different colors, it was a business bag in terms of the briefcase when people got out of college, became a fashion brand with a new designer. look at burberry, the same thing and look at what macy's has done. macy's regained quite a bit of appeal, the localization strategy. we've seen mass businesses be able to reinvent but it takes time. >> dana, real quick, how long

will investors give ron johnson? >> they're not giving him very long. you have to see daylight that trends changed. by fourth quarter you have to see some element that traffic trends are stabilizing. >> as i said, i'm at least rooting for him. dana telsey thank you for joining us this morning. >> you're rooting for everyone? >> everybody. >> okay, as long as you're rooting -- not everyone can -- >> i'm equal opportunity rooting across the board. >> this is really a new side, so profit-making entities you're rooting for all of them? >> absolutely. >> even owe they're trying to make profits. >> i want them to make profits and do well. >> you are coming along. we call him dr. debt, a pro in fixed income, joining us to talk libor, the fiscal cliff, mortgages and the fed's next move -- dpsh. >> all of this depressing stuff. >> doug descheel, when you

talked about off camera, after we talked about your hair, is qe3 coming and you didn't pause. is qe3 coming? >> qe3 is coming. >> you said of course. >> that's what i said. >> i said why and you said because -- >> they have to do something. >> because they're there and have to do something. that's what i keep saying with the dual mandate you're at 8.3% unemployment, if you're not going to do something, we'll get somebody else who can or somebody else who will. isn't that what policymakers will do? >> you're absolutely right. two issues face the economy, employment and housing. on the employment side you're right, they're even questioning and debating whether there's a structural issue and whether rates can help that. that the jury is still out. on the housing side the jury is not out. we know there's structural issues in the housing market where the rate is almost

irrelevant. the rate is almost counterproductive. if you look at the mortgage market the housing market side, you've lost originators, the level of competition to compete to refinance a guy gone. the number of people in the mortgage business you've lost them and now in an area where the process to actually get to a loan, look how easy it was before. how hard was it to underwrite a loan when you didn't have documentation. you didn't need people and now you have people and you have the risk of litigation, nobody wants to make a loan. in that situation, lowering rates makes it worse. all they do is call the guy they know gets through the process. every time the rate goes down they call the same guy so it looks like you're helping but you're only helping the same guy, if actually you didn't move the rate, then they'd say wow, we're not doing any business. who are we going to call? maybe every time the rate goes down they call the guy who they just put into a 4% mortgage and say hey, i know you can get through the agency underwriting

process. i can get you 3.5 and they make a big profit all the time. >> so we are familiar with the notion of pushing on a string that the fed doesn't have a lot that it can still do. is it worse than pushing on a string? you say they will do qe3 but is it a negative that they will do it in. >> you have to look at marginal benefits, marginal costs. everyone on the open market committee will think the marginal benefits are diminishing significantly. what do they perceive as the margial costs, what the potential detriments? one of the detriments you're already seeing debated is are we getting to a size in these various markets where we're causing distortions in pricing, where we're becoming the dominant owner of a security, where now it's not the free market determining prices and i think they're becoming very concerned that you just can't grow this. >> and you don't know how that comes home to roost ever. how do you think it finally comes home to roost? i was saying it, too, if you're worried about a couple of banks

fixing libor or the small-time players, if you've got the united states' federal reserve fixing prices, what is the potential downside from that? >> the issue is how they get out. i have people sending me charts, look at what happens when the fed starts tightening regime. i tell everybody throw the charts in the garbage because we've never been in this type of environment ever before so historical precedent is basically irrelevant. >> people say the fed balance sheet contracted over the past year and that's a big mistake. >> the contraction, i mean they're reinvesting paydowns, doing operation twist. >> tweaking from a high level. >> that's true. >> don't you like at stock market at 13-1? >> i've told you on this before, at some point the yields on fixed income don't make sense but when people look at the returns in bond funds they're not looking at the yields.

they're looking to the the total appreciation. people tell me i'm crazy, what do you mean bonds aren't a good investment? look at how much money i've made in bonds and can't distinguish what the yields will be at 1%, than when you've gone from a 4% to 1% yield environment, generating returns in far excess of stocks. people going out of stocks into bonds. we'll have a person talk about pensions. it will be very interesting to hear what's going on in the pension world. >> it's a disaster. >> which is whether they're feeling compelled to get out of stocks and go into bonds because of the nature of accounting. >> did you see the big gross reports and equities dieing? what do you think? >> if equities are dying, bonds are dying. think about it. bonds come at tranching equity at the end of the day. what is the creation other than the sovereigns which create bonds out of vapor, when we

create all kinds of corporate bonds that's tranching equities. if you're telling me equities are debt, corporate bonds are dead. >> neel kashkari came on to defend saying what bill gross was trying to suggest returns will come down across the board and equity also still outperform bonds. >> there can't be a complete disconnect relative to where bonds are. >> we'll have more with doug dachille throughout the show. you went to medical school? >> but never wanted to practice. >> did you finish medical school? >> i went through it and left in my last year. because i had a personal problem with my parents. >> okay, all right, but so you can't write a -- >> i cannot write a prescription. >> i got this -- >> that's why, see i -- >> a director would have taken

that, but it wasn't, see, up next -- >> much more fun to give people a pain than to listen to them complain about their pains. up next, gas prices up 11% since june, the winter heating season is coming and geopolitical tensions on the rise. we'll talk about what's moving oil prices and how it could hit your wallet. later, is now the time to buy or refi? doug dachille and somebody else will sound off on that, they may not agree.

we're back on "squawk box" this morning. the international energy agency says growth is going to slow further in 2013, following the downbeat forecast by opec and the u.s. government. joining us now, john hofmeister, founder and chief executive for citizens for affordable energy, former ceo of shell. are they manipulating the price, op opec? >> they'll look out for their country first, the nation second and the world third. i don't see anything being done that will offset the strength of this cartel so we're at their mercy. >> when you look at where oil prices have gone in the past

couple weeks, is that a function of what opec is saying, is that a function of an expectation of qe3? it's a function of what? >> they have some of the best competentists in the world in the opec cartel and know what's going on around the world, they talk to everybody all the time. the one thing that policymakers always miss, they miss the effect of natural oil decline on the ongoing marketplace. we've seen prices recover a bit, not that the world economy is recovering all that much, but we've seen it recover a bit because demand is still there. we're going to use 84 million, 85 million barrels a day, even in this environment, and everybody worries about the upside, and there's no plans anywhere to deal with the upside from a public policy standpoint. companies of course are always workinon the upside, but they also have declines they have to factor in to whatever their investment plans are. >> we've talked about the keystone pipeline together on this show. in the past two weeks since

we've lost seen you cnook bought into canada, into the into the u.s., what does that mean? >> the chinese will keep taking care of the chinese and keep doingd doing and doing it and we have a big fight in the united states against don quixote and jabba the hut. how about oil wells on military bases? we're not doing anything that takes care of the traditional energy sector in a meaningful way. >> what's jabba the hut doing? >> jabba the hut is consuming oil every day, this huge economy that's going to keep consuming oil. >> i thought that was like a solar type, you know, i thought you had the wind cover with don xuixote and solar, you saw the lithium batteries, the u.s. government gave that company all the money to develop it, bankrupt basically so china comes in and puts the money in and china has all the stuff that

the u.s. government sort of paid to develop. >> the reality is there's a short term every day that has to be dealt with and see a long-term we should be planning for but you can't substitute the long-term planning for the daily requirement of what the economy needs to fuel itself. and i've said before, there is an invisible tax on the american consumer coming from the absence of public policy and the american consumer really has to get concerned about this, because when you go up 35 cents a gallon in a week in chicago, or now california could well go up a quarter, 30 cents, who knows because of the refinery fire, this is putting everyday people at the mercy of insensitive elected officials. >> but john, the hydrocarbon industry has found a way to do, to have basically a boom at least over the last three or four years in spite of the obama administration. >> thank goodness to the fact there still is a private sector in parts of the country so a

land owner can still grant mineral rights on his or her land and state personaling authorities where the states care about job creation can work together to try to make that happen. let's call it a boomlet, not a boom. the reason is the declines that we're seeing in the existing fields offset much of the boom so it doesn't really turn into what the boom that people would like to see. >> john, how do we get nat. gas into cars? peter orszag had an interesting proposal subsidizing gas stations to put nat. gas along the corridors where there's a lot of truck driving. would you do that? >> absolutely. start with the strategic approach and decide how do we in the united states economy offset imports from people who don't like us. set a goal of 10 million barrels a day production of oil, oil first of all and then substitute imported oil with natural gas. trucking is one whole sector we

could go after. we could displace million barrels a day of imports with trucks using natural gas. i'm at a meeting in chicago where we'll talk about how we can go about doing that, in addition we could start looking at liquid alternatives from natural gas for existing cars or future cars and use methanol in addition to ethanol to wean ourselves off imported oil. >> john it doesn't float the boat of the progressives. they are going to do solar, wind and batteries and it doesn't float the boat. it's not sexy. it's hydrocar gones. you're so old-fashioned, get away from that, just had the warmest july ever, you're still pushing the hydrocarbon. >> i tell students in college these days their grandchildren are going to work in the hydrocarbon business. >> mr. hofmeister, we have to go. >> his name is hofmeister already, so it's the hofmeister

meister. the hofinator. >> thank you, joe. >> the last two weeks of summer, price of gag, what's it going to be? >> depends what part of the country you're in, california, chicago, it's going to stay expensive for a while. other parts will have a glut and price also be lower. >> we appreciate your time. see you very soon. coming up, a check on the mortgage market and then your tweets, your money, how the world of social media is changing the investing landscape, from doug dachille, when we return. time now for today's aflac trivia question. boeing is currently designing an airplane named after which children's television character? the answer when cnbc's "squawk box" continues. lac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack!

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the ninth annual hedge fund regatta after a neck and neck race with lucas capital. there's louis bacon's hedge fund, not getting out of the business but recently giving $2 billion back to his investors, he edged out gersten lermen's group in the end. the firms include names like aqr capital highbridge and jamison capital. proceeds go to a junior program founded by the new york harbor foundation. >> a bunch of bankers racing their boats off the harbor. it's a great idea, let's go race our yachts. >> what happens on the golf course? no? there's nothing to be said? sailing you think is in a different category? >> a bunch of hedge fund guys racing their yachts is not the optics that work out that well, do you think that? >> if i talked about horses that

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welcome back to "squawk." in the headlines this morning, let's take you through them. jcpenney shares under pressure after the retailer reported a wider than expected quarterly loss. ceo ron johnson says he's confident the company's transformation remains on track. we already know the summer's drought impacted u.s. corn and soybean crops. we'll get the latest reading on the situation in about an hour when the usda releases its

latest crop report. analysts believe it will be 11% below last year. video game industry sales fell 20% in july, joe. i don't know if you stopped playing at the house in. >> no, my son and i, when there's not a new game, it really is like a movie, almost like a movie, it's similar to the movie business, if you don't have a hit you'll see numbers down 20%. he has actually been texting a video game maker, trying to get them to make the next batman game and we found out that guy is going to make a superman game instead and he's upset and wants to get them in a room and talk some sense to them. it depends on the title. >> we're still on elmo, but there's an elmo video game which i'm anxious about. >> ha, ha, ha! you ever see kevin clenton? >> i saw the documentary. i shouldn't admit this, but if you watch that documentary "being elmo" i watched it on an

ipad on the airplane and i was crying at the end, sitting next to a woman, i had to be like this -- >> people don't know this about you. >> it was the most remarkable movie and you think about what that guy has been able to do for children, it was unbelievable. >> jcpenney numbers, same thing i saw you like this, and you were all misty about -- you're very, you take a lot of these things to heart. >> i cry at car commercials so there you go. >> american airlines, the son calls the mom. go ahead. >> we were just finishing up on video games, sales fell 20% in july, compared to a year earlier. ndp group which compiles the figures says july was the eighth consecutive month of falling sales. mortgage rates are sitting close to rates not seen since the 1950s. joining us is barry habib, chief marketing strategist for residential finance corporation and doug dachille is here from first principles capitals management. in the green room, was the audio on in the green room?

>> i was listening. >> did you hear his rant about -- >> i did. >> is he right? >> i agree with some of the things that doug said but there's a lot of comments made about the mortgage industry that aren't really true. you can get a mortgage. >> did he make some of them? >> well, i this i that -- >> well talk to him. >> i think doug's talked about -- >> he'll call you an ignorant slut and we'll get this going. >> i think what doug said is the voice of a lot of people in both media and in the outside world. there are certainly issues within the mortgage industry, many of them created by the dodd-frank ruling, the barrier to entry is very tough. we have most of us in this industry are older because it's tough for new people to get in. i think the dodd-frank has created a lot of confusion for clients. i think it's added a layer of cost for customers. i think the mortgage industry adapted and it really hasn't saved anybody money. in fact, i think people in the mortgage industry are making more money now because of

dodd-frank due to the fact that they've chased the brokers away, and -- >> exactly. these are -- >> is this unintended consequences again in. >> absolutely unintended consequences. >> is it bad? did more harm than good? >> in my opinion more harm than good. >> if you can do less and make bigger margins now. every time, you get a 390 rate, when they sell that rate into the market they make 5% or 6% every time they do the deal. >> unlike broker, when you do lending by a banking, you don't have to disclose what the earned fees are, like brokers had to do. look, whether that's right or wrong it's still a competitive marketplace. however, here's the thing. people can get mortgages. you just have to qualify for them and isn't necessarily the issues with individuals qualifying or credit standards because they're fine, it's just good business. we're going back to the levels we were before we got ourselves in trouble. people are saying relax the

underwriting. that's just stupid. did you forget what happened five years ago? yesterday was the five-year anniversary of the credit crisis. >> its a a roach motel. you already let people into the motel. now you're saying guys, you're in it. we laxed underwriting standards it and let you get in but not going to let you get a lower rate. that's a problem. >> you nailed it. the problem is this, it's not necessarily you don't qualify, it's the loan-to-value ratio. where you can do this, i talked about this offline, if you take that first mortgage and instead of saying forgive principle, that opens up pandora's box, i don't agree. if you say let's reduce the rate t makes things easier but people are going to wake up and say hey, i own a home that's worth $200,000 that i owe $250,000 on. break it in two, do a first refinance. >> what does that mean? >> you have 80% of the loan as far as the value of the home.

you don't forgive the rest. $100,000 home, $80,000 you refinance on a first mortgage at a low rate. the balance that you owe, say you owe another 40,000, do it as a second mortgage, no payments on it, you pay the balance plus interest when you sell the home. >> or you just leave the original rate on that or you just leave the original rate on it and let that 80% of that current appraisal go to the market rate. >> you just said offline and i don't mean to out you, you think rates are going to go lower. >> because? >> i don't think anything changed. this rally in stocks we've seen and the decline in bonds came off of, i thought a lackluster jobs report, it was a sigh of relief it wasn't a bad report. the situation in europe really hasn't gotten much better, i don't think so. our deficit spend is 43%, andrew. we are still in shaky ground. >> what is the best 30-year fixed, 15-year fixed and ten-year arm these days?

forget about the co-op market in manhattan. >> you can do a 30-year fixed around 3.5, zero points, conf m conforming, below $417,000, some areas higher. >> for audience, talk -- >> for our audience, is there something above super jumbo, did you buy that huge thing next to your fancy pad yet? he's got to knock down walls. you got major construction stuff going on, on the upper west stuff. >> i do not. >> you have a triple, super double secret probation loan, right, bigger an that i super jumbo. >> you know -- >> go ahead, sorry. >> the super maxijumbo they have it out there. >> is that what it's called? >> no. >> okay, all right. >> i don't have that, super maxi. >> it's called a sorkin mortgage. >> you bring up a great point, i talk to people all the time, you guys in the mortgage business, how come when i buy a lot of anything, i always get a

discount but with the mortgage when i buy more, why is it more expensive? because you're buying less. what people need to understand is that the pool of loans in the conforming area is much greater so you're buying into a larger pool as you go into the jumbos. >> all complicated, isn't it? all i know is if rates are this low, people out to be building and buying and it's just not happening. >> how much mortgage origination on a relative basis is getting done to purchases versus refi? what is the ratio? >> right now it's a lot of government loans and a lot of refinance loans, about 70% refinances. that's okay because you should be doing that kind of volume. the key, in my opinion, is the rental market is really tight, it's very expensive, and when you start to look at today's rates, it really doesn't make sense if you have the downpayment to rent. you should be owning, but people are afraid, and they hesitate. >> that's a liquidity premium. you buy a house and if you don't know your job is going to stay in the geographical area and you have to sell in two years the

excess rent that can be extracted is just a mobility premium that people are willing to pay because they're uncertain they're going to be able to keep a job in this area and want to move to another area, if you have an underwater house and you lose your job it makes it difficult to move cross-country. >> absolutely. >> so that's the excess value that can be extracted by an owner who can rent. >> eventually if rents continue to rise at the pace they're going and if rates remain low for at least a period of time, you will see a lot of people wake up and say -- >> if the employment picture is better. you really need the employment picture to be better to get people comfortable owning a home and been in that job for a year and think it's going to stay. >> you're 100% right. >> barry, thank you. >> thank you for telling me about the sorkin super jumbo maxi. >> super maxijumbo. >> i'm going to buy the entire co-op. >> andrew all of these things are matters of public -- if i googled you, it's there, baby,

double secret probation loan is there. >> i was a little print journalista, so -- >> you have a movie. you have a book. >> i think there's a commercial coming. up next, social media -- >> just don't google aaron sorkin. >> a look at how the world of twitter, facebook and other social sites are changing the way trading firms seek alpha and how you can take advantage with your double super secret sorkin maxi jumbo. y. >> hi, it's elmo from "sesame street" and you're watching "squawk box." elmo likes cnbc. "squawk box" wants to hang out with you. we're hosting a google plus hangout with author ben mezrick and andrew ross sorkin. first go to cnbc's google plus page and add to us your circles. each day we'll be soliciting your questions, ask ben about his books or andrew about the

show. if we pick your question you'll get an invite to hang out august 15th with ben anden drew starting after "squawk box." submit your questions via twitter to @squawkcnb to @squawkcnbc, #squawkhangout. it's your chance to talk live to "squawk" and one of the most interesting authors of our time. so come, hang out with us. stay connected with "squawk box" on google plus, and on twitter.

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we're spotting shifts in sentiment, or rather spotting shifts in sentiment is fast becoming a very big business amongst some of the world's top investors. joining us this morning to talk about all this, a company that provides the raw data used to monitor these moves, seth mcguire is the director of business development at gnip. welcome to you, seth. talk to the audience about what exactly you do. you measure sentiment on twitter and across the internet? >> well, first, thanks for having me this morning, excited to be here. we don't measure the sentiment.

what we provide is the data that companies can use to measure sentiment or idea breaking news. we aggregate data from social networks like twitter or word press or stock twits and deliver that data to our clients that range from business intelligence platforms to pr agencies to hedge funds and they do analysis on it to make decisions. >> and so, give me an example of a situation where you got to sort of first move or look by really being able to look through the data online and then an investor able to take that information, make a profit. >> sure. so the famous geopolitical example here is the osama bin laden death, which first broke on twitter about 20 minutes before it broke on more traditional news sites. you see this play out more distinctly across other news stories where the story may not break on one of these networks but what happens is the story quickly saturates faster than traditional news. for example if you go to our blog at gnip.com, yesterday's

story the posting about the jpmorgan initial loss announcement a few months ago. we you saw that play out different ways across social media. stock is like a twitter for investors, 140 characters, you're talking about the market, because of that you saw an initial news spike and quickly saturated and everyone got a hold of that news, whereas something like twitter or word press there's a couple of differentitierations of the story breaking so it's more about capturing the catration of the story in the market, finding the breaking news component of that and looking for sentiment for specific things. >> how is it easy for a hedge fund that takes an algorithm and tries to sift through your data. sume there's got to be false positives in there. >> well, one there's a lot of data, that's the initial challenge is you have to be a fund that has the ability to do this and two, i know like any

other data source you need to find what's trusted, not trusted and at an aggregate level what's valuable and what's not priced in. in the early adopters have been the funds that have this ability, the quantitative hedge funds, the ai funds, the guys who have 20 ph.d.s sitting in a room crunching data. we're starting to see the spread toward a more research case they can execute on. let's take a look at all the mentions of apple leading up to an earnings announcement and see if there's a way we can identify how well the iphone performed based on what people have said for the last three months. >> have there been mistaken situations where there's been a piece of data that has come through and people traded off the wrong way? >> there are stories broken on twitter that haven't been true. what we see is interesting the difference between what an individual sees on twitter and the fund the aggregate sees. to give you an example last year

i guess there was a story about a bank in latvia and they didn't have the liquidity to mete obligations and two or three tweets on twitter initially talked about this, sved bank going under, can't make it, so an individual viewing this might say oh wow, look at that, but when you looked at the data in aggregate, you saw that a few people had retweeted that story and a lot pushed back. i don't know who you are that's posting it, here is a url of their financials. they posted a picture saying i'm at an atm drawing out money. t >> have regulators come and asked or requested this data so they can monitor this activity as well? >> so the government agencies we're working with now are more on the emergency front so government agencies that are trying to do disaster relief and things like that. >> none on the financial sector?

>> we're not working with anyone in the financial sector yet. so far, they've mainly been concerned with what people are posting which is what most of the banks and funds are good about blocking, they don't allow the outbound access. that said we're starting to hear interesting stories from the trade desk, from compliance officers who say i'm walking over the trade floor and see guys with iphones and ipads checking stock twits on twitter and that's worrisome. they don't want that means of accessing the data there but they're realizing that data itself is valuable. we're starting to see them ask how do i bring this data in through gnip, start consuming it in a way i can measure and monitor. >> seth mcguire of gnip i'll have to start following you on twitter. >> thank you very much. >> how many people do you follow? >> a number. lot. >> more than 100? >> more than 100, yes. >> i'm at 92. i added someone today. >> who is that? >> i don't remember. who it was.

i just did it. coming up, who says lightning can't strike twice? this bolt struck twice. we head to london and head to recap history next. flashbulbs progress. usain bolt off to a great start! here they come, off the turn. here they come, off the turn. it's somborn with.'re and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology. we believe in the power of people when technology works for you. to dream. to create. to work. if you're going to do something. make it matter.

usain bolt added more gold to his collection, and u.s. women's soccer doing the same. let's get the latest from london, where michelle caruso-cabrera joins us now. michelle, good to see you. >> hey, guys, good to see you. boy, you see usain bolt last night, the only man in history to win gold medals in the 100 and the 200 meters at consecutive summer games. it was by the way an all jamaican sweep. you can see them here all three of them and then as he crossed the finish line holds his finger up to his lips. he said in the press conference afterwards that was to silence his critics to say, you can stop talking now, because i am the best in the world. unbelievable. did you guys watch? >> it was unbelievable. i saw only the highlights but it was a remarkable situation. we were talking about soccer, too, women's soccer.

>> i know, let me tell you, hold on, we have to play the sound bite from usain bolt, he was so funny, got this whole mohammad a ali chutzpah about him. >> i same here to become a legend and shown the world i am the best without a doubt. >> i came here to become a legend. he must have said that six times in the post medal news conference and when you look at the newspapers from great britain, every single one of them, even though the brits won medals last night, look at "the daily telegraph" "the greatest" the phrase reserved for mohammad ali. >> his daughter's doing all the olympics coverage and very, she's neat to watch but you know what? the expression when the rubber meets the road, he's the fastest man that's ever lived, and so there is no question unless there's someone we haven't found

somewhere else, but he's the fastest man that's ever lived. >> they keep getting faster. how is it possible? >> look had the his body, the muscles and everything. >> the last words -- they wanted to end the press conference, he said wait, wait, i got one more thing to say. i am a living legend, bask in my glory and if i don't see that in the newspapers tomorrow i'm not going to talk to you anymore. >> that's something we should have done for a gag, go run the 100, 200, as fast as we possibly could, i would do it in like 39 seconds, i'm not kidding i think it would take me 39 seconds. >> he did it in 19.3. >> maybe we do it monday. >> the inventor -- i'm going to use one of those you lean forward, use a segway. >> the women's soccer team, great win last night. third straight olympic gold, they beat japan 2-1, it was a rematch of the painful world cup final last year. really excited. they were so thrilled.

by the way the women in this, so american women have won twice as many golds as american men, and they've way outstripped the men when it comes to total medals as well. 51-38, when it comes to total medal count, 26-13 for the women, when it comes to golds. >> and clarissa shields, that was fun to watch, too. she's got a lot of, i don't know if you saw the gold medalist in boxing, that was cool. >> i didn't but she beat the 33-year-old. >> yep, and there was no, it was no contest, and those punches look like they hurt. anyway, thanks, michelle. >> thanks, michelle. have fun this weekend with the finale. >> thank you, yeah, going to be great. coming up, he runs the fourth largest tension fund in the u.s. we've got a rare interview with ash williams, chief investment officer for the florida state board administration. then a story you cannot miss, if you do nothing else today, watch this. here is the question, what if you had your entire life hacked

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florida was one of the states hit hardest by the housing crisis but the state's pension system has been a bright spot. we'll bring you a rare tv interview with ash williams, the cio of florida's pension fund. twitter trends as a leading indicator. we're going to talk to the ceo of data analytics company topsy la labs. and hackers obliterated his digital life. matt honin lost his google and twitter accounts, had his iphone, ipad and laptop erased, how hackers hacked into the systems. the third hour of "squawk" starts right now. welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with andrew ross sorkin. becky quick is off today, guest

host is doug dachille. u.s. equity futures are down about 37 points or so on the session, we ended down yesterday on the dow a little bit and that broke a four-day streak. let's talk headlines, the justice department is not going to be pursuing criminal charges against goldman sachs or its employees related to the financial crisis. the doj had been probing accusations the firm bought against mortgages it was assigned, but the government said it couldn't meet the criminal burden of proof. this is one of the stories that's been in our headlines for months, if not years and now it's come to an end, like accusing somebody of, what was your great line? >> it was bad. >> it was bad? >> i'm not going to press child molestation charges, bestiality. i don't think i'm going to press the beastiality charges against

you. but it implies that you have something to hide that it was this close but because i'm not going to do it, i can't really -- i don't have pictures of you with the horse or whatever. >> the question is has it been unfair for the past two years which i argue probably it has, to have all of this out there. >> sheep. >> what did you say? >> sheep. i don't have actual pictures but i'm pretty sure that you were -- >> pretty sure? >> yeah. >> but i'm happy the doj said it's over, otherwise you have this cloud that hangs over a firm's head. >> they should have said that this turned out, we weren't even close with this witch hunt of getting anywhere near criminal charges. >> and it was a waste of our time, and but we did it and -- >> talk about witch hunts, do you remember the carl levin, lloyd blankfein segment, my favorite segment on all of "squawk," not just what carl levin and lloyd did but your

impression of carl levin. >> which we didn't prepare, we just did it. >> which we have a clip teed up for. >> you ordered this. >> we ordered this for your benefit and for the viewing pleasure of the "squawk" audience. take a listen to this. >> do you think it's okay to sell something that you might eventually be short of and you're going to keep it short? >> i -- >> just answer what i'm saying, you little snake. >> mr. chairman i just want -- >> you're talking about. do you know, i'm a senator! >> wasn't that great. that was one of my favorite moments of all-time in "squawk" and you did a brilliant job of carl levin. >> pompous blowhard. >> carl did a great job of lloyd trying to get a slight word in edgewise. >> they don't want to hear anything, they're grandstanding for the constituents they have and demagoguing. >> there you go. >> do you wonder why they have a 10%, i think it's 9% approval rating in the senate and the

house. >> that was one of my favorite moments on "squawk." let's talk ipo news this rng , morning, manchester united will trade on the nyse in the next hour novel. priced at 14 bucks a share, below the 16 to 20 range bankers had been seeking. the trade will trade under the ticker manu. we asked david menlo about his expectations for the offering. >> this could be a deal that is going to work, and work only because of the underwriter, jeffries, they know what they're doing and going to price it to where it does work. >> in earnings news, jcpenney reported a second quarter loss of 37 cents per share, that was wider than the 25 cent loss analysts had been anticipating and it no longer expects to achieve its previously issued 2012 earnings guidance, ceo ron johnson says while the business is softer than anticipated the company's transformation is on track earlier this morning, we

asked retail analyst dana telsey about the jcpenney quarter. >> it's definitely worse than anyone expected. the traffic got worse, the traffic decline was 10% in the first quarter, down 12% in the second quarter. >> all right, florida has the -- >> they love taking shots, the cutaways of me looking down. >> anyway, well you do sort of look down on some people, right? >> but not on jcpenney or ron johnson or dana telsey. >> which is why we're laughing, you introduced her a thousand times. more than $150 billion in assets under management, here to tell us how the sunshine state is putting its money to work is ash williams, executive director and cio of florida's state board administration, ash it's great to see you. whenever we do interviews, sometimes i think back on other parts of the show, where i

wanted to clear something up and i'm going to ask you about private equity in a second. let's start with how you have tried to stay competitive in terms of return, in such a low interest rate environment with a flat stock market. what have you been, what is your asset allocation? that's a really hard question. for ash. did we check to make sure his ifp was working beforehand? all right, we're checking him right now, go back to dana telsey. >> you want to go back to danatels danatelsey? >> no, dana telsley. >> there's a comment, bolt didn't do it, ask obama. >> the track was built in jamaica man. you see why that he say cool runner all the time, i see.

>> you remember the bobsled team? >> ya man, i know some good curse words in jamaica. are we ready for ash? oh, we're going to hang with doug. were you here when, were you watching when david menlow was on? i was going to ask ash about private equity, because his point was that, it was a blanket statement that it just ruins the companies that it invests in, just enriches the partners that invest in private equity. i said some of the partners happened to be pension plans, retirement plans, union plans that a lot of people that are unable to hit their assumptions with a 1.5% ten-year or 1.7% ten-year of stock market that's gone nowhere in 12 years. they've gotten more and more involved in alternative investments and private equity. it's been a net positive for society. i have no doubt in my mind. >> when i look at private equity, some of it is an illusion and when i tell people if they want to, that everybody at home can create private

equity, as long as they have a desk drawer, with a lock, and if they want to create private equity, every month when their brokerage statement comes in, don't open it, put it in the desk drawer, lock it, open it up seven years and see how you did. when you look at private equity you're not seeing the daily fluctuations in value. i've asked private equity investors, stock market is down, where is your private equity investment? there's no relationship. >> you check it out. >> not an a daily basis. so some of it, it looks like a low volatility investment with reasonably high returns, which looks like a great opportunity, but part of it is the dampening of the realized volatility compared to what you see in your typical book which protects you maybe from making silly mistakes and selling when it's low. so i guarantee you, you could probably do as well with my strategy of just locking your brokerage statements and opening them up seven years later, and not actively trading and

panicking, you would do a, capture a big percentage of the private equity return. with less fees. >> you could say, let's say wall street, the word wall street, is that a good thing or just a bunch of crooked snakes trying to -- and the entire gamut is run, when you talk about wall street. so it's stupid to just make a blanket statement about, you know, with private equity i'm sure there's some view that work out. >> some that do and some that don't. >> staples, they can provide capital to an industry that may or may not need it. they try to run it, sometimes do they take maybe they add too much debt, take out dividends to enrich their partners. do good things happen, are jobs saved, jobs lost? just like wall street, it's not monolithic, right? >> but that's about life, right? nothing's monolithic. >> okay, fine, good.

next time we should ask him if he can hear us before we go to him. ash williams, executive director and cio of florida state board administration. did you hear any of my question the first time, ash? >> a little bit. not much. >> here's what i said, and we were talking about private equity, my point, when people disparage it, there's a lot of guys like you, guys trying to provide for, have certain assumptions they make for retirement plans and what they're able to earn for it, and that a sub 2% bond market with a flat stock market, have you moved more into direct investments or alternative investments like private equity? do you use it? >> we absolutely do, and i think the key thing is what you're trying to accomplish with that action, and what we're not trying to do is take on more risk in hope of getting higher returns. you've correctly identified the realities of the headwinds we face. we're in a world that is delevering and reregulating and in the western industrialized

democracies, growth is slowing while it's accelerating in a lot of asian, latin american and other less mature markets. what we're trying to do with increasing alternatives is a couple of things, increase our diversification, better protect capital in down markets, and thirdly, be more opportunistic and have more optionality in our portfolio to take advantage of dislocations as they occur, and alternative investments provide very superior tools for accomplishing those things. i think, to your earlier comment, about the difficulty in institutions, whetherer' endowments, foundations, pension funds or for that matter even individuals trying to compound capital for retirement, being challenged in a low rate environment, that is absolutely the case, and simply being able to own the broad market and hope it will get you where you need

to be is probably going to be a frustrating experience, so you have to look for ways to add value around the edges. >> so where are you, just what does the entire pie of what you're investing look like? how much is equity, how much is emerging markets? how much fixed income, and then how much private equity or direct investment? >> sure, global equity is currently are in the mid-50s as a percentage of the total portfolio, fixed income is about 25. real estate is about 7.5, and private equity about 5.5, 6.0, and just south of 5 in what we call strategic investments which is the bucket into which we would put hedge funds, opportunistic credit, infrastructure, things of that nature that a little bit off the beaten track. >> what are the most attractive parts of the globe for equities? >> great question. i would say equities broadly on,

if you look at valuations, oddly enough, the place where valuations certainly on any historic basis look a little more attractive would be europe, oddly enough. there's usually a reason why things are attractively valued and i don't think i need to explain what those reasons might be underlying some discounting of european equities at this point. but as it often the case things that nobody loves and things that are cheap are often exactly where an investor should be focusing. on the question of equities broadly if you go back to 1996 you've seen a cumulative $41 billion outflow from equities while you've seen about $1 trillion inflow into bonds. that suggests to me that probably the better opportunities looking forward are in the equity area. >> on that portfolio allocation what do you believe long-term is your expected return on that type of portfolio?

>> i'm going to give two answers to that. >> okay. >> the act warial investment return assumption that's set by the florida legislature is currently 7.75%. that is reviewed every year, commonly in the early fourth quarter, that will happen this year as well, and i'm sure we'll give that consideration and look at possibly lowering it. if you look at what actual returns have been over long periods of time with real data, there's tremendous variability, depending on where you set the goal posts for the time period you're measuring. if you looked at a trailing one-year period for the fiscal year period ended june 30, our return was less than a third of 1%. if you look at a 25-year period, the return is more like 8%. so it's all on where you draw the lines. if you looked at a trailing three-year number it's a low double digit number. >> all right, ash, we still have some technical stuff going on so

we're going to end it there and hopefully have you back. we appreciate your time this morning, thanks. >> very good, thank you. >> he's one of the good guys, he's figured it out. >> yes. >> in any event, coming up he spent ten years at apple's patent attorney, chip lutton will talk to us about the pattern wars in the tech sector, and the fight going on between apple and samsung over smartphone design and what it means. still ahead on "squawk box," our series on social media investing continues, with the ceo of topsy labs. the company provides data analysis that allows traders and businesses to interpret and profit from trends in social media. keep watching "squawk box" on cnbc. first in business worldwide.

it's been a bull market for tech patents and a bull market for patent lawsuits, some of the world's largest companies including microsoft, google, apple and samsung facing off in the courtroom. joining us from palo alto is chip lutton, served as apple's chief intellectual patent

officer. the i want to talk to you, chip, about what's going on in the valley over patents, so much money pouring into the patent world. i don't know if i should be worried that all of this money is going towards patents and frankly less towards innovation. >> well, first of all it's great to be here. thanks so much for having me. you know, it's true there's a huge amount of money and effort going into a boom market and tech patents on the litigation side and in terms of issuing patents and even sales of patents, but actually if you look back historically it's not that unusual for industries to go through periods where the leading firms are using their patents to carry out their competitive ends. it happened 100 years ago in automobiles and the radio industry, it's happened more recently in memory chips and microprocessors so now we're just going through one of those periods with mobile devices. the thing that is different now is that there are more patents in the system, and it's hard to

tell what each of the patents are worth and how important they are and also a robust sales market so those are the things that are a little different this time. >> chip i know you're not at apple anymore but maybe you can give us insight into the way apple thinks about the patent wars, the way it's approaching its lawsuit against samsung and how it may approach lawsuits against others. >> well, i can't talk about apple, actually, but generally speaking, as i say, firms in a tuation like this are looking to carry out their, whatever their competitive business goals are, and they use their patents to do it. t.i. had a period -- >> does it make sense, i mean, when you look at like google buying motorola in part literally for the library of patents, people talk about whether they should buy r.i.m., they're not even buying it for the actual goods. >> patents are valuable business assets and the firms accumulate them and actually they're

incredibly valuable and it makes sense that firms would not only protect their own intellectual property but also that they would seek to acquire other ip when they had the opportunity. >> do you think there should be patent reform, meaning do you think that the system itself works right now? great for lawyers. >> i think there's some aspects of the system that are troubling. i think fundamentally it's a good system, and you've got to realize that we're seeing the tip of the iceberg. there's a lot of litigation and a lot of things that are high profile and very expensive, and seem inefficient going on right now, or at any time in terms of litigation, but 99% of what goes on with the ma patent system happens behind the scenes and negotiated deals where firms buy and sell and license ip to each other, and that's a tremendously valuable. really a form of capital. >> is there something to be said about patent trolls? nuance, communication that does

speech recognition behind siri, for example, in apple, that they've basically been in the business of buying up patents for years and years and years and that has almost become the business model which they've used to threaten others with. >> again, i think, there is a patent troll problem but i think looking at serious technology companies and trying to say because they're using patents to carry out their competitive goals that's not really a classic patent troll. patent troll is someone that misuses the litigation system just to extort payments when they aren't carrying out a business purpose. and i don't think that's what you're seeing with some of these competitive suits. there absolutely is a troll problem, too much litigation that's just for the sake of litigation, but i think you have to look beyond that for some of what's going on now. >> chip, i imagine all of this is keeping you busy. we're thrilled to have you on. we hope you come on back. thank you for waking up early.

>> thanks very much, happy to be here. coming up our series an social media and money continues with the ceo of topsy labs, a company that interprets social media trends for business and traders and we'll talk to matt honan the "wired" magazine contributing editor who had his digital life wiped out, he'll tell us what he learned from apple, amazon and what he learned from one of the hackers that was probably. responsible. tdd# 1-800-345-2550 let's talk about fees.

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coming up, the man whose digital life was erased by hackers in the space of one hour. matt honan of "wired" magazine will tell us how hackers exploited security floors in apple and amazon systems to wipe his google, twitter and apple accounts. the story is extraordinary. breaking data on trade.

take a quick look at u.s. equity futures as we head to break. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.

welcome back to "squawk box." we're just seconds away from

import price data for july, and kevin ferry is standing by at the cme in chicago. don't screw this up because you don't normally do it. usually it's santelli so whatever you do, don't screw this up, kevin. >> no pressure. import prices down 0.6. that's actually weak. we were looking for it to come back on to the high side after a big oil moved down last time. small revision the dow 2.4 from 2.7. year over year, you're still looking at prices falling out of bed, joe, down 3.2% year over year. >> wow. also, when we were corresponding earlier, kevin, you wanted me to ask you something that i didn't really understand that was compelling. what was that? >> oh, well i was just noticing that there are libor subpoenas

raining down on the new york branches of these foreign banks today, so i think you really have to watch the bba is now saying they are going to go into overhaul mode, so as if we don't have enough things going on, you're going to start opening up a pandora's box here in the libor sector of the market. >> i sigh see. what would the implications be for libor, do you think? >> well, i think what they're going to do, joe, is basically put the old system in a coma, and work to device something that's a little bit better and it's going to be tricky. i'm a merck guy. i cut my teeth in the euro/dollar pit but watch the new general collateral futures at the new york stock exchange, i think that's where the interest is going to go. >> so what are they going to do with the euro/dollar futures and all the outstanding notion of

principal of contracts linked to libor? is everybody going to convert their libor interest rate swaps to cost of fund funds or fed fund basis swaps or some other index? >> are you asking me? i've asked that question as high as i could ask it and i get blank stares, so i don't think you can violate the open interest in the contracts of over two decades. >> what i find fascinating, we had somebody talking about oil earlier today and everybody uniformly agrees that there's market manipulation by a fairly strong cartel of people that have, in that case, that cartel has the exact same directional exposure to know that when prices go up, they all make money and when prices go down, they all lose money. in the libor space it's not clear that every bank has exactly the same libor exposure. so it's not clear that that cartel in setting libor and manipulating it actually is as powerful as the cartel that manages oil prices yet i don't hear any outrage of people routinely trading commodity

derivatives and commodity futures as much as i hear the outrage over euro/dollar futures and libor-based interest rate swaps. maybe it's a perception thing, everybody assumes that's what goes on when you trade commodity futures, but nobody ever really thought that was going on when you were trading euro/dollar futures. >> right, well let's go out for a drink sometime. >> i knew you guys would be, you're like soul mates. i just got you started. thank you, kevin, doug. >> thank you, have a good weekend. >> you, too. this next story is one of the craziest things and if you do nothing else pay attention. what would you do if your digital life was erased in epic proportions to hackers. our next guest is matt honan, senior writer for "wired" magazine, wrote an extraordinary story about his life effectively being hacked and communicating with the hacker. matt, tell us to audience that doesn't know what happened, give us the story. >> basically on friday some

hackers were able to get into multiple accounts of mine through easy social engineering methods and once in there they deleted all the data on my ipad, my iphone, my computer, they deleted my entire google account which had my gmail and google documents and took over my twitter account and began posting all kinds of messages to my twitter. >> that happened to anthony weiner once, somebody sent a picture of his weiner to people, and had nothing to do with him. they didn't do that, did they? >> not anything like that. there are no weiner pictures but there were some pretty tawdry stuff they posted on there. >> really? >> they posted some fairly racist things, and just it was kind of a, that was the whole point, their entire goal was to get into my twitter account and basically just cause mayhem. >> matt, in a world of the cloud where we're putting more and

more information online, they were able to exploit some serious holes in amazon and apple. >> that's right, and the interesting thing about this, to me, isn't what happened to me, personally. it's that as i started to dive into it a little bit i realized there's some really easily exploited security vulnerabilities at a lot of big companies that are doing things like only requiring the last four digits of a credit card at a billing address to give you a password reset, and you know, all of the big technology companies are moving increasingly towards cloud-based solutions but they haven't really set up the security mechanisms they should have for us to be doing that. >> and once you have the ability to reset somebody's password you have the ability to effectively take over their life. >> oh, yeah. the thing that was interesting about this, they didn't hack into my account and kind of that traditional you know, bad movie way where they're trying a million different passwords. they made a phone call to tech

support and tech support gave them a temporary password. there's no way to stop that. doesn't matter how good your password is. if you think about the things inside your e-mail, you may have your e-mail that maybe your access point to your online banking, in my case it was by getting into my apple icloud they were able to erase all my stuff so i couldn't intercept it and stop it. >> you're holding the iphone as it's physically being erased. >> exactly. when this started, it was about 5:00 on a friday, i had gotten off work a little early, playing with my daughter and all of a sudden my phone went dead, when i went to restore it from my computer, i flipped open my computer and saw it being wiped and it asked me for a four-digit p.i.n. to stop the wipe and i didn't have the four-digit p.i.n., didn't know what was going on. it was scary. >> there's a what of a happy ending to the story, you got some of the data back and also amazon and apple, which were aware of where the vulnerabilities were.

explain what the hacker did at amazon and apple because it's interesting. >> sure, so they at the time, apple has put a temporary hold on issuing password resets over the phone and amazon changed their security policy so you couldn't do this now again but at the time you could go to amazon, give them a, call amazon, give them a fake credit card number that would pass their verification thing that would check and see if it was a real number, all the sites online where you can find the fake credit card numbers that will work, and you hang up, you call back and you tell them that you've lost your password, you've lost access to your e-mail, give them the fake number you just gave them before and they'll give you a temporary password. >> it's extraordinary. this vulnerability has been closed? >> at least at amazon. i think there are other companies doing similar things. >> right. >> once inside my amazon account they could see the last four digits of my credit card numbers in my account. apple at the time was only requiring the apple i.d. billing

address in the last four digits of the credit card number on file. once they got that info from amazon -- >> they were into everything. >> they called up apple, i had it linked to my gmail accounts, password reset through google. >> mat, for those watching us this morning, if you could do it all over again and i took some of the suggestions you may be giving the viewers but tell people what they can do personally. >> the thing about trusting the cloud is you shouldn't trust it too much, and i think everybody ought to be making local backups so if something like this happens, you can get your data back. i wasn't doing it and that was stupid. you also ought to turn on two-factor authentication in gmail. it's a hassle only when getting it set up and after that it's well worth it. it could have stopped this whole thing in its tracks if i had that turned on. >> matt thank you for sharing the story. after reading your story i've done the two-factor verification on gmail and hope it saves me from something like this happening. we appreciate it, your story and

happy you've gotten a lot of your data back. thank you for joining us. >> thanks a lot. coming up the ceo of social media analytics firm topsy lab, false rumors of the syrian president's death sparked a rise in crude oil, traders with access to topsy's data would have seen immediately the rumors came from an unreliable source and hadn't been verified by any reliable news organizations, we'll ask the ceo how to profit from social media trends. at sleep number, individualizing your sleep is at the heart of every innovation.

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eye. with the midwest hit hard by summer drought, we're keeping a close watch on crop prices. cnbc's jane wells joins us with details from the department of agriculture's crop report. good morning to you, jane. >> hi, andrew. this is an important report because it's the first real field sur vie. slightly bearish on wheat. corn and soybeans coming in lower than analysts predicted. usda predicting average yield

per acre of 123 bushels the lowest in 13 years, a 23-point drop from last month. total production will be about 10.8 billion bushels, again, lower than expected, the lowest since 2006-2007, compare that 10.8 billion bushels, last year there were 12.3 billion bushels and earlier they thought we'd have nearly 15 bushels. ending stocks being cut, gosh, 40% to 650 million bushels but the price expected to go way up between $7.50 and $8.90 a bushel so not quite that $9 a bushel figure that goldman was predicting but we'll see how the summer plays out. soybeans slightly under 2.7 billion bushels, lower than what the street was expecting.

another huge jump in price from $13 to $15 a bushel, now they're saying $15 to $17 a bushelsoybeans and slightly bearish on wheat. expecting a higher production in yield but they're still raising the prices on wheat even though they're expecting more of it. wheat is expecting $7.60 to $9 a bushel on wheat. so again bullish on corn and soy, slightly bearish on wheat. >> i'm bullish on corn on the cob. it's fantastic. >> a wide range of how good it is. >> that is the problem, you got to find the sweet corn on the cob. >> we have a new butterer, it's this thing you put the stick in and slowly push it and you hold it and can go like that, the simplest thing to design and it works really well, just depressing when you get it all ready with the salt and pepper and then you, and it has no

taste and it's tough. you know the kind that -- >> i know, we had that last week. >> it's jersey. another reason to move. except now that i've seen your apartment i wouldn't move either. >> okay, let's talk about other stories we're following this morning as quickly as we can. swiss bank julius baer said to buy merrill lynch's non-u.s. wealth unit. k. kelly saying the deal is likely to be announced monday morning. coming up, more from our guest host doug dachille and head down to the new york stock exchange from the latest buzz on wall street. ready or not the stock of the day is coming up. you're watching "squawk box" on cnbc. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused.

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social media booms had a significant impact on the financial world. for investors sifting through fact and fiction it can mean a split second difference in making or losing money. he was set to join us, his name

is duncan greatwood, it's not going to work. there he is, but it's not going to work because we're taking hits. the audio is no good. just to give you some food for thought because i'm learning, do you see how this works? this company will take 400 million tweets. they write algorithms to see whether there's these trends, what's been retweeted, what's been important, so like the apple 4s, was that a crappy phone or something? they were able to tell long before anyone else did from tweets -- >> it wasn't selling as well as people thought. >> netflix, supposedly predicted what was going to happen, someone tweeted assad was dead they knew it wasn't true. >> they knew first. >> somehow they write these algorithms, uhm, i guess, really? we don't have to if you don't want to, it doesn't work. that was what was most interesting, all right i just said it. we could hear it from him. it's up to you. we'll take a break, trying to get things fixed to him.

i'll see if the audio works and the mike will work and get final thoughts, but we got to go and look at the regatta, the hedge fund regatta, we got to do that. we'll be right back. next week on "squawk box," our guest hosts include george p. bush, new deputy finance chairman for the texas republicans, and son of jeb bush, henry blonlg dgett, and t tech with ben mezrick author of "bringing down the house and accidental billionaires." the owners of the boston celtics and red sox, and the producer behind the film adaptation of "fifty shades of grey." don't miss "squawk box," starting all next week at 6:00 a.m. eastern. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend.

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the ship and all who sail on her, i kristcristhen the flying. >> okay. setting sail.

more capital claiming victory last night at the ninth annual hedge fund regatta after a neck and neck race with lewis capital. lewis bacon, the hedge fund titan, hedged them out by a fe s inches. it has grown into a friendly competition. proceeds go to the homeless. oh, i'm sorry, it goes to young people learning to sail yachts. >> a junior sailing program. >> hold on. the reason we're talking about that, we did this story earlier, and okay, 2004, i just don't know in four whether this is the right optics for the hedge fund industry? i mean, a regatta off the coast of lower manhattan? it's like john kerry on his wind surfer. it's not the right optics for, for the industry at this point.

so we brought it back so that we could do the "caddyshack." we have a little built more video from the regatta. >> take a look at this. >> stop! stop! stop! >> drop anchor. hey, you scratched my anchor. >> that's the classic line. hey, you scratched by anchor. judge snails, one of the classics and rodney. >> that was not -- >> that was not from the regatta. >> we did that as a straight story and i just was watching. >> i'm weari ining seersuckers,t so i can get into the spirit. >> no, the stock of the day, turning positive following comments from the ceo, vowing to

stay the course. he's confident that the transformation of jc penney is on track. warning it no longer expects to achieve its previously issued 2012 guidance. let's get to our guests. when wurp getting to the point, they give a lot of money to charity. but it was for junior sails. >> to learn how to be hedge fund managers. >> the yachts, small. baby yachts. so, what else have we learned today? we're going to do qe3. >> we learned from williams. you saw a professional money manager, manages $150 billion, how to make an appropriate return. how can all the people who have

transitioned from defined benefit plans, basically, you xwis figure it out. how can the average individual, professionals who have access to the best investment opportunities are struggling to find a good return on their investments. how can the average person achieve the returns necessary? >> that's the thing. >> i've seen people who say we should raise rates. >> and if you say that, people are like, you can't with the dual mandate. >> you think about it this way. the irony is by having people not have enough retirement savings, they stay in the workplace longer. i have a choice of hiring a college grad or a person who's decided to delay retirement with 30 years of experience, i'm going to hire that person. you keep the available workforce larger by having low returns because you don't have enough money to stop working. so it makes it more challenging

for young grads to come out and they move back into the houses of their family, which is bad for housing. >> what's your day for when -- >> mid 2013 when the fed returns to normal. >> when does the fed return to normal? >> they're saying 2014. >> normal. you didn't say when they're going to start. when they return to normal? >> when they start. >> 2015. >> before they start? >> oh, yeah. >> they've said -- it's a dual mandate. they're not going to start until you see unemployment get under 7%. so how long do you think it's going to take unemployment to get to 7%? it's not going to get through that threshold. until you're say seeing a 6.5% unemployment, i'm surprised they didn't make the statement and say they're going to keep rates at these levels even longer.

>> if romney were to get elected and less certain after another new ad coming out, it's entitled romney murdered jonbenet ramsey. apparently, it's a new campaign, it's on the onion. say he overcomes some of this, the campaigning that was in both sides. yesterday, i thought harwood showed two different, they had the thing where romney supposedly murdered, resulted in this person's death and then john said well, the romney campaign is say iing that the president or made it easier for welfare people. those were the similarities. i didn't think they were -- >> we didn't talk about obama's comment yesterday about the autos. where ebs he said, we were so successful with the auto bailout, i'd like to do it again. >> there are watchdog groups, they need these left wing, they

supposedly with watchdog groups for the right. they need watchdogs because they're so inflammatory. >> no, they don't. not the one i'm talking about. let's say romney is elected. does bernanke get to stay as chairman? >> he's too big to fail. you get a -- >> if you're going to put on a $2 trillion position. >> we need a little bell. >> you wrote the book, but it was already a term. >> every time he says it, there's someone else. say it again if you'd like. shameless. shameless. one last thing. we have not talked about libor. did you always know that it was fixed? >> didn't know that it was fixed, but you knew it was subject to manipulation and then the issue was did you think they could really, a group of banks uld really move it significan